Bloomberg News

RealD Slumps Most Since IPO as Analysts Question 3-D Appeal

June 10, 2011

(Updates with closing share price in second paragraph.)

June 10 (Bloomberg) -- RealD Inc., maker of the equipment cinemas use to show movies in 3-D, fell the most since its initial public offering after analysts questioned executives about the appeal of the format.

The Beverly Hills, California-based company declined $3.17, or 13 percent, to $20.90 at 4 p.m. on the New York Stock Exchange, the most since its July IPO.

Two recent releases, DreamWorks Animation SKG’s “Kung Fu Panda 2” and Walt Disney Co.’s “Pirates of the Caribbean,” generated 45 percent and 46 percent, respectively, of U.S. ticket sales in the three-dimensional format. “Megamind,” from Glendale, California-based DreamWorks, reached 66 percent in November, and earlier Disney pictures like “Tron: Legacy” and “Alice in Wonderland” drew higher 3-D percentages.

Ralph Schackart, an analyst at William Blair & Co. in Chicago, asked Chief Executive Officer Michael Lewis on the call about volatility in the percentage of tickets sold for 3-D.

“It’s going to go all over the place, but the net result is going to be a very, very good one,” Lewis said. “I don’t think you can really read that much into a couple of films’ performance.”

Filmmakers and studios still are learning how best to use the new technology and market movies produced with it, Lewis said in an interview after the conference call. Lower 3-D openings for some movies doesn’t mean audiences are shunning the format, he said.

Rising Sales

“This is still a relatively new medium and we’re in the early innings,” said Lewis, who declined to comment on specific stock movements. “Overall, the trend line is very positive.”

The company reported fourth-quarter net income of $4.47 million, or 8 cents a share, compared with a loss of $20.9 million, or 85 cents, a year earlier. Sales rose to $58.5 million from $55.4 million, the company said.

RealD technology was used on more than 16,700 screens worldwide as of June 6 and the company will add as many as 6,000 more in the fiscal year ending in March 2012, Chief Financial Officer Drew Skarupa said on the call.

--With assistance from Alex Sherman in New York. Editors: Anthony Palazzo, Stephen West

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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